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Bitcoin's Tuesday Bloodbath Was the Bottom, Analyst Says
Many on-chain metrics show signs of capitulation and seller exhaustion in bitcoin.
Updated Feb 26, 2025, 3:12 p.m. Published Feb 26, 2025, 9:59 a.m.
What to know:
- Short-term holders panicked and sent the most amount of bitcoin to exchanges at a loss since August, $3.9 billion.
- Realized losses hit $1.8 billion, the highest amount since the yen carry trade unwind in August 2024.
- The cryptoasset sentiment index posted one of its lowest levels since August 2024.
The crypto market experienced a severe downturn on Tuesday, and according to many on-chain metrics marked a bottom in bitcoin's price.
The total crypto market capitalization hovered just above $2.7 trillion—marking a nearly $1 trillion wipeout since its peak in December 2024, according to TradingView data. Several indicators suggest that Tuesday's sell-off may have marked a local bottom.
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Andre Dragosch, Head of Research at Bitwise Europe, highlighted that the Crypto Asset Sentiment Index hit its lowest level since August, coinciding with the unwinding of the yen carry trade, which saw bitcoin make a bottom at around $49,000.
"The Crypto Asset Sentiment Index just flashed a massive contrarian buy signal for Bitcoin. Widespread bearishness across flows, on-chain data, and derivatives suggests that downside risks are fairly limited. At these prices, the risk-reward outlook appears quite favorable," Dragosch noted.
On Tuesday, investors lost $1.8 billion — the largest single-day realized loss since August — when the yen carry trade unwind resulted in $3.2 billion in realized losses, according to Glassnode data.
Additionally, short-term holders, defined by Glassnode as investors who have held bitcoin for less than 155 days, sent 43,600 BTC ($3.9 billion) to exchanges at a loss— the highest level since August 2024.
These metrics are crucial in identifying potential market bottoms, suggesting that bitcoin may be nearing a key turning point.
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Japan’s Higher Rates Puts Bitcoin in the Crosshairs of a Yen Carry Unwind
A stronger yen typically coincides with de-risking across macro portfolios, and that dynamic could tighten liquidity conditions that recently helped bitcoin rebound from November’s lows.
What to know:
- The Bank of Japan is expected to raise interest rates to 0.75% at its December meeting, the highest since 1995, affecting global markets including cryptocurrencies.
- A stronger yen could lead to de-risking in macro portfolios, impacting liquidity conditions that have supported bitcoin's recent recovery.
- Governor Kazuo Ueda indicated a high probability of a rate hike, with officials prepared for further tightening if their economic outlook supports it.
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